According to the International Monetary Fund, COVID19 has inspired the ambition of creating a ‘green recovery’ in response to the economic crisis induced by the pandemic. Back in mind July, the IMF reported that finance ministers and central bank governors of the G-20 met to explore how to navigate the next stage of the crisis, generating policy to secure a durable and shared recovery.
However, it is not just the IMF who is sharing intel regarding working towards a green recovery in a postCOVID19 climate. Simultaneously, The International Labour Organization also published a report as to how to jump-start a green recovery by providing better jobs as well as healthy and resilient societies. The report further explained that, as economies begin to restart, there is an opportunity for both public and private policies to address the climate change crisis and enable the world to transition into a green economy. In short, the reconstruction of the economic fabric should put down the foundations for a socially inclusive and environmentally sustainable future. Fundamentally, now is a time to be thinking about building a better world, and investing in ESG is an opportunity to do that.
By definition, ESG stands for Environmental, Social, and Corporate Governance. It refers to the three central factors in measuring the sustainability and societal impact of an investment. However, it is worth stating that ESG is not new. According to Global Sustainable investment Alliance, ESG investing grew to more than $30 trillion in 2018. Thus pre-covid, there was growing interest in this investment strategy and it has been something we have been covering for quite some time at Linear. Over the last year, we have shared the potential behind ESG investments across wealth, asset and fund management, and how they provide opportunities for both passive and active portfolios. During that time, we have also disclosed how we developed criteria to produce an ESG rating for our fund managers.
However, when we look to the goals set out as we seek to achieve a green recovery, it is clear that ESG is instrumental. Thus, COVID19 could be the turning point for this investment approach. What’s more, a growing demand and interest for ESG in a postCOVID world has been echoed by Goldman Sachs. The financial firm shared that ‘prior to this crisis, there was a meaningful and increasing focus on ESG investing and it is likely that this focus will only increase following the coronavirus. In short, ESG represents a fundamental shift when it comes to investing. In addition to this, data from Morningstar recorded that ‘sustainable funds attracted record inflows in the first quarter amid the market turmoil’, with further reports confirming that these funds are outperforming the broader market for the year.
Whilst ESG can sometimes feel like the ‘buzzword of the moment’, at Linear Investments, we are committed to a value by adding meaning towards our strategic choices. We have been studying the market and economic shifts and are working towards a greener recovery by announcing the launch of our new ESG model portfolio. Following work on developing our ESG policy, we have been able to develop a model portfolio that combines both active and passive disciplines. This is an exciting time for Linear Investments, one whereby our Head of Business Development details our new model portfolio in a video exchange with Kate Horne here: Fundamentally, it is a great sales tool for financial advisors who are interested in this field that have a specific requirement for ESG. As ESG continues to develop throughout the financial industry, Linear is looking forward to working collaboratively with clients in the field.